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The film, which has a music score but almost no dialogue, tells of Pascal (Pascal Lamorisse), who, on his way to school one morning, discovers a large helium-filled, extremely spherical, red balloon.

As Pascal plays with his new found toy, he realizes it has a mind and will of its own. It begins to follow him wherever he goes, and not rise, at times floating outside his bedroom window, as his mother will not allow it in their apartment.

The balloon follows Pascal through the streets of Paris, and they draw inquisitive looks from adults and the envy of other children as they wander the streets. At one point it enters his classroom, causing an uproar from his classmates. The noise alerts the principal, who becomes angry with him and locks him up in his office until school is over. At another, he and the balloon encounter a little girl (Sabine Lamorisse) with a blue one that also seems to have a mind of its own too, as evidenced by its act of following his.

One Sunday, the balloon is told to stay home, while Pascal and his grandmother go to church. However, the balloon follows them, through the open window, into the church; Pascal and his mother are led out by a scolding beadle.

In their wanderings around the neighborhood, Pascal and the balloon encounter a gang of big boys, who are envious of him, and temporarily steal the balloon, while Pascal is inside a bakery, however, Pascal retrieves it, and following a chase through the narrow alleys, they throw stones at the balloon, and they soon destroy it with slingshots.

The film ends as all the other balloons in Paris come to Pascal's aid and take him on a cluster balloon ride over the city.

The film serves as a color record of the Belleville area of Paris which had fallen into decay by the 1960s, prompting the Parisian government to demolish it as a slum-clearance effort. Part of the site was built up with housing projects; the remainder was left as wasteland for 20 years. Some of what is seen in the film no longer exists: one of the bakeries, the famous Y-shaped staircase situated just beyond the equally famous café "Au Repos de la Montagne", the steep steps of the passage Julien Lacroix where Pascal finds the balloon initially etc., the empty lot where all the battles took place. Instead stands the Parc de Belleville. Only the church still stands.

The film premiered and opened nationwide in France on 19 October 1956; it was released in the United Kingdom on 23 December 1956 (as the supporting film to the 1956 Royal Performance Film The Battle of the River Plate which ensured it a wide distribution); and in the United States on 11 March 1957.

It has been featured in many festivals over the years, including the Wisconsin International Children's Film Festival; the Los Angeles Outfest Gay and Lesbian Film Festival; the Wisconsin Film Festival; and others.

Throughout the 1960s, 1970s, 1980s and early 1990s, the film was popular in elementary classrooms throughout the United States and Canada. A four-minute clip is on the rotating list of programming on Classic Arts Showcase.

Since its first release in 1956, the film has generally received overwhelmingly favorable reviews from critics. The film critic for the New York Times, Bosley Crowther, hailed the simple tale and praised director Lamorisse, writing that "Yet with the sensitive cooperation of his own beguiling son and with the gray-blue atmosphere of an old Paris quarter as the background for the shiny balloon, he has got here a tender, humorous drama of the ingenuousness of a child and, indeed, a poignant symbolization of dreams and the cruelty of those who puncture them."[4]

When the film was re-released in the United States in late 2006 by Janus Films, Entertainment Weekly magazine film critic Owen Gleiberman praised its direction and simple story line that reminded him of his youth, and wrote, "More than any other children's film, The Red Balloon turns me into a kid again whenever I see it...[to] see The Red Balloon is to laugh, and cry, at the impossible joy of being a child again."[5]

Film critic Brian Gibson wrote, "So far, this seems a post-Occupation France happy to forget the blood and death of Hitler's war a decade earlier. But soon people’s occasional, playful efforts to grab the floating, carefree balloon become grasping and destructive. In a gorgeous sequence, light streaming down alleys as children's shoes clack and clatter on the cobblestones, the balloon bouncing between the walls, Pascal is hunted down for his floating pet. Its ballooning sense of hope and freedom is deflated by a fierce, squabbling mass. Then, fortunately, it floats off, with the breeze of magic-realism, into a feeling of escape and peace, The Red Balloon taking hold of Pascal, lifting him out of this rigid, petty, earthbound life."[6]

In a review in The Washington Post, critic Philip Kennicott had a cynical view: "[The film takes] place in a world of lies. Innocent lies? Not necessarily. The Red Balloon may be the most seamless fusion of capitalism and Christianity ever put on film. A young boy invests in a red balloon the love of which places him on the outside of society. The balloon is hunted down and killed on a barren hilltop–-think Calvary–-by a mob of cruel boys. The ending, a bizarre emotional sucker punch, is straight out of the New Testament. Thus is investment rewarded-–with Christian transcendence or, at least, an old-fashioned Assumption. This might be sweet. Or it might be a very cynical reduction of the primary impulse to religious faith."[7]

The review aggregator Rotten Tomatoes reported that 95% of critics gave the film a positive review, based on twenty reviews.[8]

The film was first released on VHS by Embassy Home Entertainment in 1984. A laserdisc of it was later released by The Criterion Collection in 1986, and was produced by Criterion, Janus Films, and Voyager Press. Included in it was Lamorisse's award-winning short White Mane (1953). A DVD version became available in 2008, and a Blu-Ray version was released in the United Kingdom on January 18, 2010; it has now been confirmed as region-free.[16][17]